LONDON: The FTSE 100 index of Britain’s leading shares ended up on 23 March, but strong UK retail sales data capped early gains made after the US Federal Reserve held interest rates and sparked a rally on Wall Street and in Asia.
The FTSE 100 closed 61.2 points, or 0.95% higher at 6,318.0, its highest close since 26 February.
The rally in US and Asian stocks provided early momentum after the US Federal Reserve left interest rates steady but dropped earlier language about future tightening, prompting widespread expectations that key US rates may be cut.
UK banking was the standout sector, still supported by minutes of a Bank of England policymakers’ meeting on 21 March that allayed fears of a near-term rate increase.
Talk of consolidation within the European banking sector also helped shares, with Barclays adding 3.7 %, Royal Bank of Scotland climbing 1.4 % and HBOS tacking on 1.1 %. An upgrade from ABN AMRO also boosted Lloyds TSB and HSBC.
The FTSE 100 pulled back from earlier highs, however, after data showed that British retail sales shot up in February at their fastest pace in over two years, indicating consumers are spending freely despite recent interest rate rises and boosting speculation another hike is on its way.
Strong spending on clothes and shoes lifted overall sales volumes 1.4 % last month, twice the rate forecast by analysts, for the biggest monthly increase since January 2005.
Commodity stocks featured on the upside, on firmer oil and metal prices.
US crude oil rose $1 a barrel towards $61 driven higher by gains in US gasoline prices after a fall in stocks fuelled concerns of tight supplies ahead of the summer driving season in the world’s biggest consumer.
BP added 2.3 % while rival Royal Dutch Shell was up 1.3 % and BG Group rose by 3.4 %.
As base- and precious-metal prices climbed, mining stocks supported, with BHP Billiton up by 1.4 %, and Rio Tinto gaining by 2.1 %.
Antofagasta climbed 3.9 % as some traders cited vague bid speculation.
“Last night’s dovish tone from the Fed pushed European equities higher at the open but gains have proved difficult to sustain despite continued merger speculation, support from commodities and bullish earnings being reported,” said Paul Webb, a trader at CMC Markets.
“The fact that UK retail sales data has come in above expectations has done little to provide any cheer as this is adding weight to speculation that a quick rate hike from the Bank of England could leave stocks under pressure.
“Furthermore, today’s US economic data has been somewhat mixed with choppy growth forecast, leaving Wall Street under pressure so this too is failing to provide any support closer to home.”
NEXT BEATS FORECASTS
Next topped the FTSE 100 leaderboard, adding 6.6 % after the clothing retailer topped consensus forecasts with a 6.5 % rise in 2007 profit before tax.
On the downside, Imperial Tobacco shed 1.5 % as three big shareholders in its bid target Altadis told the Spanish company’s board to accept a revised offer from the world’s fourth-biggest cigarette group, if a rival bidder fails to materialise soon, the Times reported.
Britain’s biggest broadcaster ITV dipped by 0.9 % after media regulator, Ofcom said it had launched an inquiry into the use of premium-rate phone services in television programmes following concerns raised by viewers and stakeholders.
“With little left on either the corporate or economic calendars before the end of the week it’s difficult to see where tomorrow’s direction will come from,” said CMC’s Webb.
“Certainly after some strong gains over the last few days there’s scope for profit taking, but at the same time further M&A chatter could easily lend additional support in the near term.”